August 4, 2011 Company Report

Electronic parts (001300 KS) and materials

Despite current slump, outlook to gradually improve Will Cho +822-768-4306 [email protected]

Trim TP to W160,000; Maintain Buy call We reiterate our Buy call on Cheil Industries but trim our target price by 5.9% to W160,000. We are cutting our target price, as: 1) the number of shares outstanding for Cheil should increase by 4.9% following the companyÊs share-swap acquisition of its former subsidiary Ace Digitech, and 2) the value of its investment securities was eroded by a recent share pullback and the exclusion of Ace Digitech shares. We are adjusting up our 2011F EPS by 2.9% to reflect gains on the disposal of CheilÊs equity stake in Ace Digitech, while maintaining our 2012F EPS.

2Q Review: Operating profit down 38.9% QoQ to W62.8bn Buy (Maintain) Cheil Industries reported weak 2Q11 results, affected by: 1) contraction in IT Target Price (12M, W) 160,000 demand and 2) increased prices for raw materials (for use in chemicals). Revenues Share Price (11/08/03,W) 112,500 in 2Q hit a historic high of W1.48tr (up 5.8% QoQ; up 11.5% YoY) on the back of Expected Return (%) 42.2 price hikes and market share gains. However, operating profit fell short of our EPS Growth (11F, %) 18.8 estimate of W72.7bn, coming in at W62.8bn (down 38.9% QoQ; down 38.9% Market EPS Growth (11F, %) 6.1 YoY). P/E(11F, x) 17.6 Market P/E(11F, x) 11.0 Despite the solid performance of the semiconductor patterning materials business, KOSPI 2,066.26 operating profit at the electronic chemical materials (ECM) division shrank 26.1% Market Cap (Wbn) 5,625 QoQ to W26.9bn (OP margin of 6.6%) due to the sluggishness of the display film Shares Outstanding (mn) 50 unit. The chemicals divisionÊs operating profit declined 35.3% QoQ to W23bn (OP Avg Trading Volume (60D, '000) 487 margin of 3.5%) because price hikes were limited (amid the IT market slump). The Avg Trading Value (60D, Wbn) 62 fashion division also saw its operating profit deteriorate 61.2% QoQ to W11.1bn Dividend Yield (11F, %) 0.7 Free Float (%) 88.3 (OP margin of 2.8%), hurt by marketing expenses (related to its flagship brand 52-Week Low 87,800 Bean Pole as well as new brands) and an inventory valuation loss (W5bn). 52-Week High 139,500 Beta (12M, Daily Rate of Return) 1.1 2H Outlook: Gradual pickup in earnings and progress of new businesses Price Return Volatility (12M Daily, %,SD) 2.4 Although seasonal demand is likely to weaken YoY in 3Q11, we project CheilÊs Foreign Ownership (%) 26.3 earnings to pick up from its lackluster 2Q results. The ABS spread, which has been Major Shareholder(s) Card et al. (7.79) a major culprit for earnings erosion, started improving from end-July, and a National Pension Service (7.77) recovery in demand for electronic appliance should enable the company to raise its Capital Research and Management chemical prices starting in August. CheilÊs 3Q revenues are forecast to climb 3.2% Company(CRMC) et al. (5.43) QoQ to W1.53tr, while its operating profit is projected to leap 109.6% QoQ to Price Performance W131.7bn (OP margin of 8.6%) thanks to gains (W40bn) on the disposal of its (%) 1M 6M 12M equity-method investment in Ace Digitech. Absolute -14.1 -5.5 20.1 Relative -11.3 -5.2 4.7 § Earnings & Valuation Metrics FY Revenues OP OP Margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA Share price 160 KOSPI (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (x) (x) (x) 140 12/09 4,406 253 5.7 120 2,397 390 329 6.7 23.6 1.5 8.4 12/10 5,121 335 6.5 270 5,395 474 147 11.4 20.6 2.0 12.4 120 12/11F 6,026 396 6.6 327 6,409 486 -239 11.3 17.6 2.0 12.9 100 12/12F 6,893 540 7.8 428 8,398 723 -11 13.1 13.4 1.7 8.8 80

12/13F 8,174 726 8.9 575 11,265 943 294 15.2 10.0 1.5 6.6 60

Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests 40 Source: Company data, Daewoo Securities Research estimates 7/10 11/10 3/11 7/11

Please read carefully important disclosures at the end of this report. August 4, 2011 Cheil Industries

Despite flagging IT demand, we believe investorsÊ focus should now turn to the companyÊs smooth progress in new business areas. 1) The TV-use polarizer business is showing stable sales volume growth, with production yield of 90%. 2) The company is likely to roll out AMOLED materials in end-3Q as planned. 3) The semiconductor patterning materials business delivered improvements in both revenue and operating profit even in 2Q. 4) And solar cell paste sales are forecast to grow more than tenfold (YoY) to W60bn this year thanks to a diversified customer base.

Table 1. Cheil IndustriesÊ earnings forecasts (on a K-IFRS consolidated basis) (Wbn, %) 1Q11 2Q11P 3Q11F 4Q11F 1Q12F 2Q12F 3Q12F 4Q12F 2010 2011F 2012F Revenues 1,400 1,481 1,528 1,618 1,546 1,699 1,780 1,868 5,113 6,026 6,893 Chemical 621 650 677 650 647 707 786 739 2,267 2,599 2,879 Electronic material 384 406 485 486 483 541 606 617 1,413 1,762 2,247 Fashion 377 397 335 470 398 422 357 500 1,353 1,578 1,676 Others 18 27 31 12 19 28 32 12 80 88 91 Operating Profit 103 63 132 99 132 129 153 126 330 396 540 * Adjusted OP 84 60 92 97 115 127 151 124 334 329 516 Chemical 36 23 34 31 47 53 51 44 166 123 195 Electronic material 36 27 76 39 52 57 73 63 104 178 245 Fashion 29 11 21 28 31 18 27 18 59 88 94 OP margin 7.3 4.2 8.6 6.1 8.5 7.6 8.6 6.7 6.5 6.6 7.8 * Adjusted OP margin 6.0 4.1 6.0 6.0 7.4 7.5 8.5 6.6 6.5 5.5 7.5 Chemical 5.7 3.5 5.0 4.8 7.2 7.5 6.5 5.9 7.3 4.7 6.8 Electronic material 9.5 6.6 15.7 8.0 10.8 10.5 12.0 10.2 7.4 10.1 10.9 Fashion 7.6 2.8 6.2 5.9 7.9 4.2 7.6 3.6 4.3 5.6 5.6 Pretax income 110 55 126 89 126 121 144 116 310 380 507 Net profit 92 54 106 76 107 103 122 99 254 328 431 RP margin 7.8 3.7 8.2 5.5 8.2 7.1 8.1 6.2 6.1 6.3 7.4 NP margin 6.5 3.7 7.0 4.7 6.9 6.0 6.9 5.3 5.0 5.4 6.2 Growth (QoQ/YoY) Revenues 5.6 5.8 3.2 5.9 -4.5 9.9 4.8 4.9 20.0 17.9 14.4 Chemical 11.4 4.7 4.1 -4.0 -0.6 9.4 11.1 -6.0 24.1 14.6 10.8 Electronic material 8.9 5.9 19.3 0.3 -0.8 12.2 11.9 1.8 16.8 24.7 27.5 Fashion -6.9 5.3 -15.6 40.3 -15.2 5.9 -15.4 40.1 18.6 16.6 6.2 Others 67.9 49.2 12.7 -61.5 59.5 49.2 12.7 -61.5 -4.0 10.8 3.3 Operating Profit 122.4 -38.9 109.6 -25.1 33.5 -1.8 18.3 -17.7 25.0 20.0 36.3 Chemical 18.6 -35.3 46.2 -7.8 49.9 14.3 -3.3 -15.2 35.0 -25.8 58.1 Electronic material 1,002.1 -26.1 183.4 -49.2 34.8 8.9 28.2 -13.5 9.3 71.4 37.5 Fashion 124.2 -61.2 85.4 33.3 13.6 -43.4 53.5 -34.7 12.3 50.3 6.7 Pretax income 148.9 -49.4 126.9 -29.5 42.2 -4.4 19.3 -19.3 97.6 22.5 33.5 Net profit 165.5 -40.6 95.5 -29.1 41.8 -4.3 19.2 -19.3 97.9 29.0 31.2 * Note: Adjusted OP refers to operating profit excluding other operating gains and losses, Source: Daewoo Securities Research

Figure 1. ECM divisionÊs earnings trend and forecast Figure 2. Chemicals divisionÊs earnings trend and forecast

(Wbn) (%) (Wbn)ABS (L) PS (L) (%) 750 Polarizer (L) Display (L) 20 800 EP (L) Others (L) 10 Semiconductor (L) OP margin (R) OP margin (R)

600 16 640 8

450 12 480 6

300 8 320 4

150 4 160 2

0 0 0 0 07 08 09 10 11F 12F 07 08 09 10 11F 12F

Source: Company data, Daewoo Securities Research Source: Company data, Daewoo Securities Research

Daewoo Securities Research 2 August 4, 2011 Cheil Industries

2H Outlook: Gradual pickup in earnings and progress of new businesses

3Q11 Outlook: Although 3Q seasonal demand will likely weaken YoY due to a worsening macroeconomic Revenues of W1.53r and environment, Cheil IndustriesÊ earnings should bottom out after 2Q11. We believe that the OP of W131.7bn worst is over for the companyÊs chemicals division, which saw raw material prices surge amid slowing electronic appliance demand. Indeed, ABS spread, which has been a drag on the companyÊs earnings, started improving from end-July, and a recovery in electronic appliance demand should enable the company to raise its chemical prices further starting in August. At the ECM division, revenues from semiconductor patterning materials should steadily increase as Samsung ElectronicsÊ migration to finer processes accelerates, and the profitability of the TV-use polarizer film business will likely improve on the back of higher production yields.

CheilÊs 3Q revenues are forecast to climb 3.2% QoQ to W1.53tr, while its operating profit is projected to leap 109.6% QoQ to W131.7bn thanks to gains (W40bn) on the disposal of its equity stake in Ace Digitech. Excluding one-off gains, 3Q operating profit is forecast to reach W93.6bn, up 49% QoQ.

Smooth progress of new Despite weaker-than-expected earnings, CheilÊs share price has trended upward on businesses expectations of mid- to long-term growth. Thus, we believe focus should now turn to the companyÊs smooth progress in new business areas despite flagging IT demand. 1) The TV-use polarizer business is showing stable sales volume growth, with production yield of 90%. 2) The company is likely to roll out AMOLED materials in end-3Q as planned. 3) The semiconductor patterning materials business delivered both revenue and operating profit improvements even in 2Q. 4) And solar cell paste sales are forecast to grow to W60bn this year.

Figure 3. Share performance of Cheil Industries

140,000 Concerns of worse-than-expected earnings Release of earnings results

120,000

(W) Expectations of better-than-expected 1Q11 earnings 100,000 4Q10 2Q11

3Q10 Earthquake in Japan Looming concerns of 80,000 2Q10 double-dip recession

60,000 3/10 5/10 7/10 9/10 11/10 1/11 3/11 5/11 7/11

Source: Daewoo Securities Research

Figure 4. ABS spread trend Figure 5. CheilÊs AMOLED material revenues and market trend

(US$/tonne) (Wbn) (%) 800 2,000 Cheil's AMOLED material revenues (L) 60 AMOLED material market (L) 600 50 1,600 Cheil's M/S in AMOLED market (R)

400 40 1,200 200 30 800 0 20

400 -200 Spread to widen from end-July 10

-400 0 0 1/08 7/08 1/09 7/09 1/10 7/10 1/11 7/11 09 10 11F 12F 13F 14F 15F

Source: Cischem Source: Daewoo Securities Research Daewoo Securities Research 3 August 4, 2011 Cheil Industries

Trim TP to W160,000 (vs. current share price of W112,500); Maintain Buy call

Raise 2011F EPS by We reiterate our Buy call on Cheil Industries but trim our target price by 5.9% to W160,000 2.9% to reflect gains on (from W170,000). We applied the sum-of-the-parts valuation methodology (operating value + disposal of equity stake asset value) to calculate the target price. We are cutting our target price, as: 1) the number in Ace Digitech of shares outstanding for Cheil should increase by 4.9% following the companyÊs share- swap acquisition of its former subsidiary Ace Digitech, and 2) the value of the companyÊs investment securities was eroded by a recent share pullback and the exclusion of Ace Digitech shares. We are adjusting up our 2011F EPS by 2.9% to reflect gains on the disposal of CheilÊs equity-method investment in Ace Digitech, while maintaining our 2012F EPS.

Table 2. Cheil IndustriesÊ earnings revisions (on K-IFRS consolidated basis) (Wbn, %) Previous Revised % change 11F 12F 13F 11F 12F 13F 11F 12F 13F Revenues 6,009 6,882 8,173 6,026 6,893 8,174 0.3 0.2 0.0 Operating profit 384 539 728 396 540 726 3.2 0.2 -0.3 Net profit 319 431 575 328 431 578 2.9 0.0 0.4 EPS (W) 6,200 8,613 11,461 6,379 8,612 11,506 2.9 0.0 0.4 OP margin 6.4 7.8 8.9 6.6 7.8 8.9 - - - Net margin 5.3 6.3 7.0 5.4 6.2 7.1 - - - Source: Daewoo Securities Research

Table 3. Calculation of Cheil IndustriesÊ target price (sum-of-the-parts) (Wbn, % ) 12M-fwd EBITDA Target EV/EBITDA Fair value Notes Chemicals 243 8.7 2,117 Average EV/EBITDA of peers ECM 300 14.5 4,360 30% premium to average EV/EBITDA of peers Fashion 127 5.7 727 Average EV/EBITDA of peers Operating value ① 7,204 Investment asset value ② 1,326 Value of stakes in affiliated companies Net debt ③ 443 End-2Q11 estimate Equity value (① + ② - ③) 8,087 # of shares ('000 shares) 50,530 Excludes treasury shares (post-merger) Target price (W) 160,044 Current price (W) 112,500 Closing price as of Aug. 3, 2011 Upside potential (%) 42.3% Source: Daewoo Securities Research

Table 4. Stake value of affiliated companies (%, Wbn) Company Stake Value Notes Marketable securities 13.1 999.8 20% discount to market value Samsung Fine Petrochemicals 3.2 44.2 0.4 30.9 Samsung Techwin 0.1 3.8 0.0 6.5 iMarket Korea 2.8 15.3 Non-marketable securities Samsung Economics Research Institute 1.0 0.5 20% discount to fair value as of end-4Q10 Samsung 4.0 170.4 Samsung General Petrochemicals 0.9 11.8 15.0 0.2 Investments under equity method Samsung Petrochemical 21.4 40.3 20% discount to fair value as of end-3Q10 SD Flex 50.0 2.6 Total 1,326.2 Source: Daewoo Securities Research

Daewoo Securities Research 4 August 4, 2011 Cheil Industries

Comparison of share performance and valuation against global peers

Table 5. Valuation comparison of global peers (Wbn, %, x) Share OP margin P/E P/B EV/EBITDA ROE Sector Company Mkt Cap performance -1M -3M 10 11F 12F 10 11F 12F 10 11F 12F 10 11F 12F 10 11F 12F Cheil Industry 5,625 -14.1 -6.3 6.7 7.2 7.9 20.9 16.0 12.9 2.0 1.9 1.7 12.0 10.1 8.4 10.9 12.0 13.5 Chemical LG Chem 29,789 -9.7 -12.9 14.9 14.8 15.1 16.8 12.2 10.8 4.0 3.3 2.6 8.6 7.5 6.6 29.8 29.0 25.5 Honam Petrochem 14,098 8.3 18.2 12.6 12.9 13.2 18.0 12.1 10.8 3.2 2.5 2.1 8.5 9.0 8.2 19.2 22.6 20.6 Hanhwa Chem 6,734 -4.2 5.3 13.4 14.5 14.6 17.0 11.3 10.3 2.3 1.9 1.6 9.8 11.1 10.3 14.1 19.0 17.7 Dow Chemical 41,533 -7.3 -16.9 5.8 9.4 9.7 12.6 11.4 9.4 2.0 1.6 1.4 9.3 7.2 6.5 11.5 15.9 16.4 Chemical avg. -3.2 -1.6 11.7 12.9 13.2 16.1 11.8 10.3 2.9 2.3 1.9 9.1 8.7 7.9 18.6 21.6 20.0 ECM OCI Materials 1,288 -6.3 -5.4 33.4 35.3 37.2 21.5 14.8 11.0 4.7 3.7 2.8 9.6 8.5 6.9 24.1 27.7 28.7 Duksan Hi-Metal 886 30.0 34.6 18.1 25.9 28.5 61.7 31.7 16.9 8.0 8.5 5.6 23.4 22.3 13.0 12.4 26.6 35.8 Shin-Etsu Chemical 24,009 -6.3 -11.1 14.1 14.9 16.1 17.0 15.4 13.0 1.2 1.1 1.1 6.0 5.5 4.9 7.0 7.6 8.5 Sumitomo Chemical 8,793 -4.0 -12.1 4.4 4.2 4.9 25.8 14.3 8.5 1.2 1.2 1.1 8.1 8.3 7.4 4.5 7.6 12.7 ECM avg. 3.3 1.5 17.5 20.1 21.7 31.5 19.0 12.4 3.8 3.6 2.6 11.8 11.2 8.0 12.0 17.4 21.4 Fashion LG Fashion 1,352 13.9 37.2 10.7 11.7 12.4 14.7 11.6 9.6 2.1 1.8 1.6 5.2 6.6 5.7 15.4 16.6 17.0 Handsom 730 11.0 35.1 18.4 19.3 19.5 9.2 8.9 7.9 1.2 1.2 1.0 3.6 5.9 5.4 14.0 14.4 14.4 GAP 10,847 2.7 -18.1 13.4 9.4 10.3 10.2 12.7 10.8 2.8 3.6 4.3 5.0 4.7 4.4 26.8 25.4 34.2 Fashion avg. 9.2 18.1 14.2 13.5 14.1 11.4 11.1 9.4 2.0 2.2 2.3 4.6 5.7 5.2 18.7 18.8 21.9 Source: Bloomberg

Figure 6. Share performances of global electronic material makers Figure 7. Share performances of global chemical makers

(1/1/10=100) (1/1/10=100) 250 Cheil Industries 550 Cheil Industries OCI Materials LG Chem Shin-Etsu Chem Honam Petrochem 450 200 Sumitomo Chem Hanwha Chem Dow Chem 350 150 250

100 150

50 50 1/10 4/10 7/10 10/10 1/11 4/11 7/11 1/10 4/10 7/10 10/10 1/11 4/11 7/11

Source: Thomson Reuters Source: Thomson Reuters

Figure 8. Cheil IndustriesÊ 12-month forward P/E band Figure 9. Cheil IndustriesÊ 12-month forward P/B band

(Mkt cap, Wtr) 22.0x 16.0x (Mkt cap, Wtr) 2.5x 2.1x 8 14.0x 8

1.7x 10.0x 6 6 1.3x

4 6.0x 4

0.7x

2 2

0 0 96 98 00 02 04 06 08 1012F 12 96 98 00 02 04 06 08 1012F 12

Source: Daewoo Securities Research Source: Daewoo Securities Research

Daewoo Securities Research 5 August 4, 2011 Cheil Industries

Cheil Industries (001300 KS/Buy/TP: W160,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/10 12/11F 12/12F 12/13F (Wbn) 12/10 12/11F 12/12F 12/13F Revenues 5,121 6,026 6,893 8,174 Current Assets 1,207 1,480 2,132 3,160 Cost of Sales 3,573 4,326 4,897 5,856 Cash and Cash Equivalents 28 110 328 988 Gross Profit 1,549 1,700 1,996 2,318 AR & Other Receivables 515 712 1,046 1,296 SG&A Expenses 1,214 1,372 1,480 1,615 Inventories 612 647 747 864 Operating Profit (Adj) 335 329 516 703 Other Current Assets 38 7 7 7 Operating Profit 335 396 540 726 Non-Current Assets 2,865 3,146 3,340 3,461 Non-Operating Profit -8 -16 -33 -46 Investments in Associates 148 178 203 229 Net Financial Income 26 31 53 54 Property, Plant and Equipment 1,121 1,438 1,533 1,562 Net Gain from Inv in Associates 32 29 26 26 Intangible Assets 30 47 47 47 Pretax Profit 326 380 507 680 Total Assets 4,072 4,626 5,472 6,621 Income Tax 56 52 77 102 Current Liabilities 861 802 732 825 Profit from Continuing Operations 270 328 431 578 AP & Other Payables 488 518 598 691 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 223 277 127 127 Net Profit 270 328 431 578 Other Current Liabilities 150 7 7 7 Controlling Interests 270 327 428 575 Non-Current Liabilities 446 779 1,242 1,696 Non-Controlling Interests 0 1 2 3 Long-Term Financial Liabilities 104 461 921 1,367 Total Comprehensive Profit 270 351 492 639 Other Non-Current Liabilities 313 281 274 274 Controlling Interests 270 350 490 636 Total Liabilities 1,308 1,581 1,973 2,522 Non-Controlling Interests 0 1 2 3 Controlling Interests 2,761 3,043 3,495 4,093 EBITDA 474 486 723 943 Capital Stock 250 250 250 250 FCF (Free Cash Flow) 147 -239 -11 294 Capital Surplus 429 421 421 421 EBITDA Margin (%) 9.3 8.1 10.5 11.5 Retained Earnings 1,149 1,427 1,817 2,354 Operating Profit Margin (%) 6.5 6.6 7.8 8.9 Non-Controlling Interests 4 2 4 7 Net Profit Margin (%) 5.3 5.4 6.2 7.0 Stockholders' Equity 2,765 3,045 3,499 4,100

Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/10 12/11F 12/12F 12/13F 12/10 12/11F 12/12F 12/13F Cash Flows from Op Activities 432 210 302 576 P/E (x) 20.6 17.6 13.4 10.0 Net Profit 269 328 431 578 P/CF (x) 13.6 11.9 9.0 7.0 Non-Cash Income and Expense 194 174 293 366 P/B (x) 2.0 2.0 1.7 1.5 Depreciation 129 156 205 238 EV/EBITDA (x) 12.4 12.9 8.8 6.6 Amortization 10 1 2 2 EPS (W) 5,395 6,409 8,398 11,265 Others -89 20 22 9 CFPS (W) 8,186 9,492 12,460 15,970 Chg in Working Capital -31 -246 -345 -265 BPS (W) 54,678 57,165 65,772 77,169 Chg in AR & Other Receivables -27 -202 -334 -251 DPS (W) 750 750 750 750 Chg in Inventories -95 -36 -100 -117 Payout ratio (%) 13.4 11.6 8.8 6.6 Chg in AP & Other Payables 88 55 80 94 Dividend Yield (%) 0.7 0.7 0.7 0.7 Income Tax Paid 0 -47 -77 -102 Revenue Growth (%) 16.3 17.7 14.4 18.6 Cash Flows from Inv Activities -262 -471 -295 -233 EBITDA Growth (%) 21.5 2.5 48.9 30.4 Chg in PP&E -250 -472 -300 -267 Operating Profit Growth (%) 32.2 18.3 36.3 34.6 Chg in Intangible Assets -12 -3 -3 -3 EPS Growth (%) 125.1 18.8 31.0 34.1 Chg in Financial Assets -2 0 0 0 Accounts Receivable Turnover (x) 11.3 10.3 7.8 7.0 Others 1 4 7 36 Inventory Turnover (x) 9.0 9.6 9.9 10.1 Cash Flows from Fin Activities -226 338 212 317 Accounts Payable Turnover (x) 15.6 13.9 12.4 12.7 Chg in Financial Liabilities -104 103 -50 -50 ROA (%) 7.4 7.6 8.5 9.6 Chg in Equity -86 1 0 0 ROE (%) 11.4 11.3 13.1 15.2 Dividends Paid -36 -38 -38 -38 ROIC (%) 15.8 13.9 17.2 20.4 Others 0 -37 -61 -91 Liability to Equity Ratio (%) 47.3 51.9 56.4 61.5 Increase (Decrease) in Cash -58 82 218 660 Current Ratio (%) 140.2 184.6 291.5 382.9 Beginning Balance 86 28 110 328 Net Debt to Equity Ratio (%) 10.4 20.5 20.5 12.2 Ending Balance 28 110 328 988 Interest Coverage Ratio (x) 11.9 10.7 8.9 8.0 Source: Company data, Daewoo Securities Research estimates

Daewoo Securities Research 6 August 4, 2011 Cheil Industries

Important Disclosures & Disclaimers As of the publication date, Daewoo Securities Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of Cheil Industries as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. As of the publication date, Daewoo Securities Co., Ltd. issued equity-linked warrants with Cheil Industries as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. Analyst of the subject company or member of the analyst's household does not have any financial interest in the securities of the subject company and the nature of the financial interest (including without limitation, whether it consists of any option, right, warrant, future, long or short position). This report reflects the sole opinion of the analyst without any external influences by third parties.

Buy Relative performance of 20% or greater (W) CheilInd Stock Trading Buy Relative performance of 10% or greater, but with volatility 200,000 Ratings Hold Relative performance of -10% and 10% 150,000

Sell Relative performance of -10% 100,000

Overweight Fundamentals are favorable or improving 50,000 Industry Neutral Fundamentals are steady without any material changes Ratings 0 Underweight Fundamentals are unfavorable or worsening 8/09 2/10 7/10 1/11 7/11

* Ratings and Target Price History (Share price (----), Target price (----), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development.

This report has been provided by the research division of Daewoo Securities Co., Ltd. The stock ratings, target prices, estimates and overall viewpoints are from the research division of Daewoo Securities. Investors can access Daewoo SecuritiesÊ research directly through our website (www.bestez.com), FirstCall Research, Reuters, FnGuide, WiseFn, FactSet and Bloomberg (DWIR). This document was prepared by Daewoo Securities Co., Ltd. („Daewoo‰). Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith. The information has not been independently verified. Daewoo makes no guarantee, representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information and opinions contained in this document. Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for information purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed or published in whole or in part for any purpose. Daewoo and/or other affiliate companies, their directors, representatives, or employees may have long or short positions in any of the securities or other financial instruments mentioned in this document or issuers described herein at any time and may purchase and/or sale, or offer to purchase and/or sale such securities or other financial instruments in the open market or otherwise, in each case either as principal or agent. This document is for distribution within the United Kingdom to persons authorized under the Financial Services Act 1986. Daewoo Securities is the sole provider of information contained in this document. DaewooÊs U.S. affiliate, Daewoo Securities (America) Inc., a member of FINRA/SIPC, is the sole distributor of this document within the U.S. This document may be distributed in the U.S. only to major U.S. institutional investors as defined in Rule 15a-6 of the U.S. Securities Exchange Act of 1934. Any U.S. recipient of this document wishing to effect any transactions in any securities discussed herein should contact and place orders with Daewoo Securities (America) Inc.

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